Not content with the recent passing of a bill to counter fraud and corruption in Mauritius, the government in Port Louis has now turned its attention to cleaning up the offshore sector and is preparing a series of measures to do just this, principally through stronger supervision and clearer taxation.
In the recent Mauritian budget, Finance Minister Vasant Bunwaree
proposed a reduction in the tax breaks enjoyed by offshore companies,
and announced a series of regulations designed to clean up the
sector. But the measures do not stop there. The government is
to bring in a comprehensive five-year plan to reinforce the reputation
of Mauritius as a financial centre and eliminate money laundering.
Money laundering is one thing that no offshore jurisdiction would
wished to be blighted by - one only has to look at the unfortunate
principality of Liechtenstein, which is currently embroiled in
a sizeable money laundering scandal. A senior government official
said 'With the new measures, we are going to put the offshore
sector in order.'
The measures are undoubtedly all designed to win favour with the Organisation for Economic Cooperation (OECD) and the Financial Action Task Force (FATF), and indeed Mauritius was one of the six offshore jurisdictions to submit a written pledge to conform to international standards of tranparency and mutual assistance, which led to the island's exclusion from this week's OECD list of 'damaging' tax havens.
An unnamed government official said detailed plans would be drawn up after consultation between the government, the offshore sector and the OECD. Mauritius had been criticised by the OECD for having exceptionally low taxes in its offshore sector, together with a lack of transparency in financial transactions.
In his budget speech, the Finance Minister said all foreign offshore companies would be subject to a uniform tax rate of 15 percent, with a tax credit of 80 percent of that sum. Bunwaree stated 'This will result in a net effective tax rate of three percent for offshore companies.' In the past, companies which joined the offshore sector before June 30 1998 were not paying any tax on their profits. Companies registered after that date had been paying 1.5 percent effective tax - 15 percent tax with a 90 percent tax credit.
Bunwaree also said in his budget speech the tax credit would be phased out, but did not give a timeframe. In addition, international companies would be precluded from issuing bearer shares, registered agents of these companies would be subject to an annual inspection and audit, and offshore companies would be required to submit their audited accounts within six months. Bunwaree said 'These measures will act as a deterrent to dubious companies while allowing genuine companies to operate in a more trustworthy environment.'
However, a government official said the proposals for lowering tax breaks would not go into force until they had been examined and approved by a committee drawing up the plans for long-term reforms.
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